Kabbage, Inc. has filed for Chapter 11 bankruptcy protection, the company said. The company, also known as KServicing, was Kabbage’s lending book business before that company agreed to be purchased in 2020.
why is it important: Bankruptcy proceedings show the Paycheck Protection Program (PPP), the government’s pandemic backstop that was supposed to be fintech’s time to shine, is what led to Kabbage, Inc.’s troubles.
To note: Softbank invested $250 million in the company in 2017 and remains a major shareholder in Kabbage, Inc.
- Besides Softbank, other shareholders include Blue Run Ventures, Mohr Davidow Ventures and Thomvest Ventures.
- Kabbage, Inc.’s creditors include Customers Bank and the Federal Reserve Bank of San Francisco.
Details: Kabbage, Inc. said in the Delaware filing that it had estimated assets between $500 million and $1 billion and liabilities in the same range.
Backtrack: Kabbage’s PPP lending unit was the second largest PPP lender in the country as of mid-2020. American Express agreed to acquire Kabbage in 2020 but without the company’s loan portfolio.
Yes, but: In May 2021, federal regulators entered the program amid allegations of fraudulent companies receiving the loans. The Justice Department has launched an investigation into several fintechs, including Kabbage, Inc., to look into allegations of mistakes made in billions of dollars in pandemic aid to struggling businesses.
What they say“The processing of the remaining PPP loans presented a number of challenges for the company, particularly in light of the extreme administrative and financial burden placed on the company,” the bankruptcy court documents read, citing the DOJ investigation.